The capital gains tax annual exempt amount provides UK taxpayers with an exemption from liability to the tax on gains of up to £12,300 in the current tax year; it is a valuable exemption for taxpayers who expect to realise gains on the disposal of chargeable assets - for example investments in shares, property, or business assets.
The announcement in the Autumn Statement that the exemption is to be significantly reduced from April 2023 was therefore greeted with a mixed response.
The annual exempt amount will be reduced to:
- £6,000 from 6 April 2023; and
- £3,000 from 6 April 2024
The reductions are likely to result in a significant increase in the volume of chargeable disposals being reported through Self Assessment and also through the 60 day property CGT system; some commentators have expressed concern about HMRC's ability to cope with the increased workload.
Taxpayers who are concerned about the new measures may consider:
- reviewing the timing of chargeable disposals to take advantage of the current £12k exemption where appropriate
- reviewing ownership arrangements and considering if assets can be transferred between legal partners to utilise more than one exempt amount and benefit from lower tax rates
- bed and breakfasting assets to continue to take advantage of the annual exempt amounts (albeit at the new reduced levels) - always being careful to avoid triggering the anti-avoidance legislation
- utilising reinvestment and deferral reliefs to minise or delay the crystallisation of capital gains tax liabilities
If you wish to discuss the impact of this announcement on your affairs, contact us today.